Re: [MLUG - DISCUSSION] Question for JK on fallow Columbia buildings.

["Jonathan King" <EMAIL:PROTECTED>]

Sorry for the late reply.  Sometimes you have to work at work, and
yesterday I was up at 5 am to make an 8 am meeting at the Watergate,
so last night I was...asleep.

On 8/3/06, Christian M. Cepel <EMAIL:PROTECTED> wrote:
> Jonathan....  I've been growing increasingly perplexed, amazed, shocked
> that two _huge_ established buildings in what I believe to be
> high-demand/traffic business areas have lain fallow for what.... around
> 5+ years.

Actually, it hasn't been quite that long.  Osco closed in late 2004.
Mega Market closed in late 2002, and Nowell's gave it up in 2003.

> Why in the world would the MegaMart, Osco, and Nowells (Nifong)
> buildings remain vacant.

Well, the one thing they have in common is that all three locations
are owned by Stan Kroenke in one way or another.  And, in all three
places, it's safe to assume that the reason they are still empty is
because Kroenke can afford the revenue hit while he waits for the
tenant or development opportunity he *really* wants.  Remember: this
was the dude that kept Biscayne around as a rotting hulk for the
better part of a decade, but then when the last leases burne dout, he
tore the thing down and built Famous Barr, Old Navy, etc.

> What a loss of revenue.   I could think of a
> million ways to put those buildings to work,

Yes and no.  I am honestly surprised the Mega Market location is still
empty, since the only thing wrong with it is the fact that it's ugly
as sin, but that hasn't stopped other places from being raging
successes... They just re-did Sam's Club in the same Broadway
Marketplace, and it's not impossible that they're contemplating doing
something to spiff that location, too.

The Osco building is, I'm afraid, an obvious tear-down.  It's really
old, probably shot through with asbestos, way below modern code in
many ways, and sitting next the Office Depot building, which is in
such great shape that their roof partially caved in like a year and a
half ago.  Technically, Kroenke doesn't own the Office Depot building,
but his group is (I believe, correct me if I'm wrong, Nathan)
responsible for leasing it, and I'm willing to bet $20 straight up
that he has some kind of option on the location once Office Depot's
lease is up.  TKG ("The Kroenke Group") also owns the field next door.
The obvious plan here is to scrape the stuff that's there away and
put something else there.  My conjecture is that the winning plan is a
business class hotel with major conference facilities and some shops
around the place, but other plans would make sense, too. I have no
idea what the timeline for that would be, but it would likely be
whenever Office Depot's lease is up and/or Kroenke can talk them into
a lease swap.  (If I were him, I'd get them as a new tenant for the
thing he'll build on the site of the old Wal*Mart on Stadium; there's
going to be a *lot* of office space  going up on the west side of town
in the next five years.)

That leaves the Nowell's site.  The problem there is two-fold.  First
of all, the Nowell's site screams "big grocery store", but no big
chain would be willing to committ to that when a Super Walmart is
going in like 2000' down the road.  For a short time, there was a
semi-plausible rumor that Whole Foods was interested in at lest part
of the site.  That would just about make sense, given that chain's
requirements for locations:

http://www.wholefoodsmarket.com/realestate/index.html

We're short on the people, but they'd probably look past that given
the fact that the Boone-Cole-Callaway County area is over 250,000.
But the problem there is that the Wal*Mart in the same shopping center
is going to close, and everything else there screams "short term
lease".  So it's easy to project that everything there is going to get
torn down, too.  What would go up?  It's hard to say. Kroenke has
slotted a bunch of retail into the new Kohl's/Super Walmart area, so
maybe this would somethind different.  But, rest assured, it will be
built upon in a massive way, probably within the next five years.

[snip]

> in like storage units, or gosh, I don't know... anything.   I know that
> parking isn't the best for either location (Nowells being the worst
> victim here), but I just don't understand what could motivate an
> owner/developer to let those things lie fallow.

It's the long-term perspective...

> I know the owner of the Nowells building has been really tied up in the
> last 4-5 years with promoting his kid's band Wisdom's Cry, and now
> Caleb's solo career, but I can't imagine that hiring a property manager
> to get that property working for him wouldn't be a possibility.  He did
> manage to sell the Nowells northeast location.

Huh?  You're saying Kroenke doesn't own this building?  If that's
true, I'm really surprised, unless, again, he has a long-term option
deal on it.

> Are these properties cursed?

The buildings are cursed with curse of ugliness, but the locations are blessed.

> Oh.... and nobody's mentioning it occurred to me a month or two ago that
> it seems that the "Whitecastle / Grill & Chill / Whatever" property on
> Providence opposite the chamber of commerce/Hardees area is no longer
> cursed.  StreetSide has been there now for a number of years and they
> seem to be flourishing and really bringing up the quality of business on
> that portion of the road... next thing you know, someone's gonna raze
> the liquor store to the ground and put some nice boutique or something
> in it's place.  (I wouldn't mind a McDonald's).

Nah; maybe a better liquor store or a bar.  MU's pull is too strong.

> And what's with the _field_ between StreetSide/Caroline's and Osco?   I
> would think that property alone would be worth a TON to a developer.

Again, Kroenke owns it plus everything between it and Broadway except
for the land the Walgreen's is on.

> An added shock was to drive by Dairy Queen and see the hideous new
> design they've come up with.  Especially as they've added "Grill n'
> Chill" or "Grill & Chill" or whatever to their design.

I hadn't seen this; are you talking about the one on the corner of
Forum and Chapel Hill?

> Speaking of McDonald's.... I understand why Wendy's #115 failed
> downtown, but I've been surprised for a long while that campus doesn't
> have a McDonald's in walking distance.

It does: Lowry Mall.  Also, Chipotle is/was a McDonalds concept.

>   I think it's all the more a
> shame that campus does have that awful Lowry Mall McDonald's that's open
> for 3 hours a day and not on weekends, holidays, intercessions, or any
> other time they just don't feel like being open, and that lacks a drive
> through, or even a parking lot where one would not have to pay a meter
> just to stop in and grab some food......

Hey, that's what the PeachFong area is for.

> on the million to one chance
> that they could find an open space.  I know most people would say just
> go a mile down the road to Business Loop / Providence, but I hate doing
> any business in that area (except for AJ's automotive and air)....
> especially if the kids are on lunch break from school.

You're really not going to see a lot of drive-through going on
downtown, except for banks.  It was a minor surprise that Hardee's
rebuilt on Providence, given what the lot was worth.

> Also, if Taco
> Bell finds it worth their while to have a both locations that closely
> together, why not McDonald's too?

Dunno exactly.

> Finally.... .what's with the NE corner of Broadway/Providence.   Why
> would such a huge piece of prime heavy bi-directional traffic
> real-estate be so un/under utilized?

Once again, this is a classic case of "burn of the leases on the back
end of the property" (except for the Jiffy Lube, I think everything
else is finally year-to-year) combined with the problem of
re-developing abandoned gas station sites: you *know* you're looking
at a ton of money to fix the contamination issue that's going to be
there.  A local lawyer owns the whole mess, I believe, and he or his
investors will sell it to whomever offers them the most money.  Given
that it's the only whole city block that may ever come up downtown in
the near future, it will be worth a staggering sum of money once
there's no Jiffy Lube there.

(OK; I lied.  The Regency Premier/former Ramada downtown is
essentially its own city block, and the long-term highest best use
there is not a decaying hotel that's never made money.  Why does it
still exist?  Well, when the bank foreclosed on it like 4 years ago,
the found out that the sale value of the whole thing was essentialy
zero, since the demo cost for the hotel negated the entire value of
the lot, at that time.  So they actually gave it back to the owner,
who found the out-of-town group that owns it now, who are twiddling
their thumbs until the can come out of it with a big gain.)

> I was really rather hoping that
> with Walgreens going in and being successfully that the nasty payday
> loan company and that NE corner could see some good usage.

Nope.  That payday loan location is *always* hopping.  They won't give
that one up until they're dragged kicking and screaming to some other
place.

> If it
> killed that gas station between Walgreens and office depot and the
> buildings behind it, all the better.

You can color the buildings behind it the Walgreens as gone; Kroenke
owns them.  I don't know about the gas station.  I'm getting the sense
Kroenke may also own an option on the small office building an former
barbecue site as well.

> The place needs to be firebombed
> and the infrastructure (Including the OD and Osco parking lots) redone.
> It's really a blight on downtown.

Your wish shall be granted, whenever it's most profitable to TKG.

> Those are some thoughts that have been running around in my head that I
> thought you might have some insight on.

See above. These  answers are all really easy.  The hard questions I
know of are:

1) So what's with the 22 acres for sale behind the mall?
2) What will Kroenke do with his 100 acres west of Target now that
Wal*Mart is going
   into the Fairview/Broadway site?
3) When will Columbia get real airline service?
4) Stevens College is going to be shrinking their campus again in the
next few years
   (although I think they've actually saved the school, amazingly
enough).  What's going
   to happen with that land?
5) Eastgate Market: Eeuw. So what's next? Ditto for the Ramada Inn north of 70.
6) Nathan Odle will strongly disagree, but the Columbia Country Club
is not a long-term
   concept, since the value of the land in 10 years is going to be a
lot more than the
   then net present value of the golf, especially since 2-5 golf
courses are going up
   around town.
7) Will the MU Life Sciences incubator ("Discovery Ridge") work?
8) The family that owns the Schnucks building plus the new Broadway Shoppes has
   been buying up hundreds of acres southeast of town.  Why?
9) Will the MU medical school stay in Columbia?
10) Columbia is going to choke on its own traffic by 2015 unless
things seriously change
    with the transportation infrastructure: will this happen?

Meanwhile, my grip on the Columbia situation will be slipping rapidly
away now that I live in Potomac, MD.  Here, the development has all
already occurred, with the exception of making some of the housing
denser, and maybe squeezing in some more light rail.  So the big news
here near DC is just how bad the housing bubble burst is going to be.
As it happens, I know the answer is "really, really bad" Last year,
the townhouse 3 doors down from me (or 4, I can't remember) sold for
$530,000.  That's for 1400 square feet of finished living space and a
trivial amount of land.  The actual value of the place, imputed from
rent, is (generously) $350,000, and maybe only $300,000.  Eight years
ago, it sold for $190,000. This year, townhouses where I live are just
not selling _at all_, because people are asking last year's prices,
and last year's prices are insane. (Is the place I'm renting worth
$300K? Absolutely, since it's a perfect location for the thousands of
people who work near where I do and earn about what I'm earning.)

One townhouse across the driveway has just dropped to $465K from
$515K, and the realtor is panicked because that move generated ZERO
additional viewings in the past two weeks.  Things are going to get
really, really ugly here and in other bubble markets, and between the
coming housing crunch, rising inflation, and Fed interest rate hikes,
you're going to see a really impressive recession in 2007.  I'm really
hoping it won't be as bad as the 1981-1983 one, but it won't be nice.
I think Columbia will weather it a bit better than some places,
although rental market prices will take a dive (mega-over-built), and
housing prices will be flat for 2 or 3 years.

jking

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